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The London Stock Exchange, which earlier this year resisted a hostile takeover by its US rival Nasdaq, today said profits were up 55% for the 12 months to March as volumes traded on its electronic system exceeded expectations ahead of an upgrade in a few weeks' time.

The exchange reported preliminary operating profits of £185.6m (€271m) for the 12 months to the end of March and revenues of £349.6m, an improvement of 20% on the previous year.

Revenues growth came amid a 58% increase in average daily bargains to 353,000 and a 38% spike in average daily value of trading on Sets, the LSE's order book, to £6.5bn.

The performance beat the average of predictions by 12 analysts which forecast operating profits of £180m.

The exchange's profit after exceptionals and tax was £110m, an improvement of 65.5% on the same period last year, and its costs fell 4% to £164m.

Chris Gibson-Smith, chairman of the LSE, said: "This has been a year of exceptional achievement, with the exchange delivering well beyond expectations on a number of important commitments and once again highlighting the unique quality of its business."

He said Sets volumes had surpassed the exchange's target levels "by some considerable margin."

Gibson-Smith added: "We implemented the planned £512m return of capital to shareholders, made good progress on our share re-purchase plan, and also increased the ordinary dividend per share by 50%. In delivering our strategy and creating a more appropriate capital structure, we have produced excellent returns for shareholders."

The exchange, which has kept its independence despite six takeover bids from rival exchanges in the last eight years, is set to unveil TradElect, an upgraded trading system, before the end of June.

Clara Furse, chief executive, said: "Trading remains strong with positive momentum carrying forward into the current financial year. The proven international success and increasing efficiency of our market underline the secular change to equity trading, as TradElect goes live this summer."

The exchange has also pledged to launch a series of new services designed to take advantage of the markets in financial instruments directive, the European Commission rules that come into force on November 1.

However, analysts have predicted the LSE's Broker services revenues, which last year improved by 31% to reach £163.8m, will be threatened by new competition, not least Turquoise, the putative European equity trading system backed by seven large investment banks, after the introduction of Mifid.

Furse said: "We are confident of delivering another year of strong growth, as we continue to evaluate opportunities for strategic development to realise in full our vision to be the world's capital market."